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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 2003
--------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from__________ to __________
Commission File Number: 2-71136
DETONICS SMALL ARMS LIMITED
(Exact name of registrant as specified in it's charter)
Washington 91-1150122
(State or other Jurisdiction of (IRS Employer ID No.)
incorporation or organization)
14508 SE 51st, Bellevue, WA 98006
(Address and zip code of principal executive offices)
Registrant's telephone number, including area code: (425) 746-6761
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes: X No:
DOCUMENTS INCORPORATED BY REFERENCE
Form S-1, Detonics Small Arms Limited, Commission File No. 2- 71136, but
excluding the balance sheet of Detonics Small Arms Limited together with the
report of independent certified public accountants, is incorporated by
reference.
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
See Appendix A
Page 1
Item 2: Management's Discussion and Analysis of the Financial
Condition and Results of Operations
No royalties or other income were booked in the first quarter of 2003.
The partnership originally had licensed the manufacturing and sale of its
products to Detonics Manufacturing Corporation (DMC) a subsidiary of Energy
Sciences Corporation, (ESC). DMC, ESC and the Partnership entered Chapter 11
bankruptcy proceedings on April 29, 1986. In late 1987, the Bankruptcy Court
approved a sale of all of DMC's assets to a new entity, formed by outside third
parties, called New Detonics Manufacturing Corporation, (NDMC). By subsequent
majority vote of the limited partners of the Partnership, a new license was
entered into between the Partnership and NDMC, which called for royalties to
begin in late 1991 at the rate of 4% of gross sales. No partnership income was
expected before that time.
On May 13, 1988, ESC's bankruptcy was dismissed and all remaining assets were
repossessed by the sole secured creditor of ESC, the firm of Murphy & Elgot.
These assets are primarily amounts owed to ESC by the partnerships and the
rights to produce products owned by the partnerships. The general partners have
begun discussions with Mr. Murphy, (who was also counsel for ESC and the
partnerships), on the elimination of most or all the debt owed by the
Partnership to ESC, (and now, therefor to Murphy & Elgot).
As previously reported, the general partners learned in late 1991 that
production of firearms at NDMC was suspended in 1991. The general partners have
subsequently been advised that Murphy & Elgot, the sole secured creditirs of the
original DMC, have moved to have the "soft" assets (the name "Detonics" and the
right to manufacture the Detonics designs) which were assigned to NDMC by the
Bankruptcy Court be returned to Murphy & Elgot. This occured in September 1992.
Mr. Murphy passed away in 1997. The general partners have had discussions with
Mr. Elgot regarding future attempts to recommercialize the products and he
indicated he would likely approve any recommercialization plan that the general
partners would be able to obtain. The general partners had been discussing such
plans with a third party, (a company being formed by Mr. Jerry Ahern, a noted
writer and firearms entreprenuer and Mr. Eric Curly, a California businessman).
Royalty amounts of 5% of gross sales have been verbally agreed to, but no
written agreement has been prepared or signed as December 31, 2002.
Unfortunately, we have just learned that this plan will not take place. Mr.
Ahern continues to explore other financing sources and remains optimistic that a
new entitiy can be funded that will lincens the partnership's products. There
can be no guarantee that it will be possible to arrange for production of any of
the Partnership's products.
PART II - OTHER INFORMATION
Item 1: Legal Proceedings
The staff of the Securities and Exchange Commission's Division of Enforcement
recommended to the Commission that it authorize the staff to file a civil
injunction action against the Partnership and Messrs. Maes and Steffey to
require timely filing of reports with the commission. Such an injunction was
entered on June 25, 1986. All subsequent reports have been timely filed.
On October 16, 1989 the U.S. Bankruptcy Court ordered the conversion of the
partnership's Chapter 11 to a Chapter 7. On May 11, 1990, the partnership filed
an amended motion to dismiss the Chapter 7. The motion was granted on June 21,
1990 and the partnership is no longer in bankruptcy.
In March 1993, the partnership received a "Notice of Beginning of Administrative
Proceeding" from the Internal Revenue Service. The issue was a possible finding
that the partnership "burned out" and is subject to recapture. The general
partners are of the position that the products and the partnership remain
viable. In July, 1993, the general partners received notification from the IRS
that they did not intend to make any changes as a result of that Administrave
Proceeding. The IRS has the right to bring the subject up again.
Page 2
Item 2: Changes In Securities: None
Item 3: Defaults Upon Senior Securities: None
Item 4: Submission Of Matters To A Vote Of Security Holders: None
Item 5: Other Information: None
Item 6: Exhibits, Financial Statement Schedules, and Reports
on Form 8-K
a) Documents filed as part of this Report: Unaudited
financial statement.
b) Reports on Form 8-K: None.
Page 3
Appendix A
DETONICS SMALL ARMS LIMITED
BALANCE SHEET
MARCH 31, 2003
(UNAUDITED)
ASSETS
Cash $ 0
Royalties Receivable 0
----------
TOTAL CURRENT ASSETS $ 0
Intangible Assets Less Amortization 0
Receivable from Affiliates Less Allowance 0
----------
TOTAL ASSETS $ 0
LIABILITIES AND PARTNERS' EQUITY
Accounts Payable $ 0
Taxes Payable 0
----------
TOTAL CURRENT LIABILITIES 0
Payable to Affiliates 672,769
----------
TOTAL LIABILITIES 672,769
Partners' Capital
(672,769)
----------
TOTAL LIABILITIES
AND PARTNER'S EQUITY 0
Page 4
DETONICS SMALL ARMS LIMITED
STATEMENT OF INCOME
FOR THE QUARTER ENDING
MARCH 31, 2003
(UNAUDITED)
Royalty Revenue $ 0
Expenses 0
-----
Net Income (Loss) $ 0
NOTE: The products owned by the Partnership were licensed to New
Detonics Manufacturing Corporation (NDMC). Under the terms of
that license, royalties were not scheduled to be paid to the
Partnership until late 1991. NDMC suspended production of all
firearms and the license with NDMC has been terminated. As of
October 2002, there are no new license agreements in existance.
DETONICS SMALL ARMS LIMITED
STATEMENT OF CASH FLOWS
FOR THE QUARTER ENDING
MARCH 31, 2003
(UNAUDITED)
Net Cash Provided By Operating Activities $ 0
Net Cash Used By Investing Activities 0
Net Cash Provided By Financing Activities 0
-----
Net Increase In Cash $ 0
Cash At Beginning Of Period $ 0
-----
Cash At End Of Period $ 0
Page 5
SIGNATURES
Pursuant to the Requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DETONICS SMALL ARMS LIMITED
(Registrant)
4/21/03 /S/ Michel E. Maes, General Partner
(Date) (Signature)
Page 6